| Dear Chamber Members,
The Province of Prince Edward Island released its 2025-26 Budget yesterday, and I wanted to take a moment to reflect with you—not only on the wins for business that it contains, but also on the pressing issues that remain and the fiscal challenges that warrant continued monitoring.
This year’s pre-budget submission from the Greater Charlottetown Area Chamber of Commerce emphasized two core recommendations that the province could address in this latest budget:
1. Indexing personal income tax brackets to inflation.
2. Launching a comprehensive review of PEI’s taxation system to improve competitiveness. This would include lowering corporate tax rates and increasing thresholds to be more competitive within the region.
Since submitting our pre-budget submission back in November, the Canadian business community has faced some significant new challenges, from tariff and counter tariff threats to changes in immigration policy. Amid all these rapid and sudden changes, the Chamber has been a part of subsequent consultations and meetings with the provincial government to speak to concerns regarding potential outcomes from these threats.
CHAMBER PRIORITIES: WHAT WAS ADDRESSED
- Income Tax Reform: The province has taken steps to increase Islanders’ purchasing power. It increased the basic personal amount to $14,650 (2025) – from $13,500 (2024) – and committed to raising it to $15,000 in 2026. Additionally, it will adjust all five personal tax brackets upward by 1.8% next January—one year earlier than previously announced.
- Corporate Tax Relief: Another Chamber priority—lowering the corporate tax burden—has been acknowledged with a reduction in the general corporate income tax rate from 16% to 15%, and the small business threshold was raised to $600,000. This combined $9.3 million investment will help Island businesses reinvest and compete more effectively.
- Workforce Support: The budget includes $1.5 million for upskilling and reskilling initiatives—something urgently needed to address the persistent labour shortages Island employers face.
- $42 Million Tariff and Trade Response Fund: This includes flexible financing and contingency support to help businesses diversify and weather trade shocks—a proactive move considering the uncertainty around tariffs.
OTHER WINS FOR BUSINESS
- $353,000 for Air Access: Investment to restore the Charlottetown-to-Halifax route is a welcome step for both business connectivity and tourism resilience.
- Support for Oyster Industry and Young Farmers: Targeted funding for critical sectors like aquaculture and agriculture shows that government is listening to ground-level concerns from Island producers.
WHERE THE BUDGET FALLS SHORT
- No Protection Against Bracket Creep: Though the announced income tax changes are welcomed, they are manual adjustments – a modest step to adjust for inflation. The absence of automatic indexing leaves PEI out of step with the rest of Canada. We are still the only province without annual bracket indexation.
- No Formal Commitment to a Tax System Review: While there are incremental tax changes, a deeper review to align PEI with national best practices is still needed to support growth and investment across sectors.
- A High Corporate Tax Baseline: Even with the 1% reduction, PEI still holds the highest general corporate tax rates in Canada – in company with Newfoundland and Labrador. PEI needs to be more aggressive with it’s corporate tax cuts to bolster investment and wage growth.
FISCAL CAUTION AHEAD
The budget projects a record $183.9 million deficit. Program spending is up 8.4%, and while much of it supports health care, education, and infrastructure – the scale of this projected deficit— and a debt servicing cost of nearly $170 million —raises concern.
This is the fourth consecutive deficit, with no clear return-to-balance plan in sight. While strategic investments are necessary, long-term sustainability must remain front of mind. We urge government to be transparent about how it will manage deficits in the coming years.
FINAL THOUGHTS
Budgets are about choices—and this one demonstrates responsiveness to several private sector priorities, including tax relief and trade resilience. This budget is much more business focused than last year, so we are making progress. However, this budget also signals the need for continued advocacy around competitiveness, and responsible fiscal management.
The Chamber will continue to engage with government and other stakeholders to push for smart, balanced, and future-focused economic policies.
As always, thank you for your continued commitment to our business community. |